Fifth Third Bancorp (NASDAQ:FITB) Is Due To Pay A Dividend Of US$0.27

The board of Fifth Third Bancorp (NASDAQ:FITB) has announced that it will pay a dividend on the 15th of July, with investors receiving US$0.27 per share. The dividend yield will be 2.9% based on this payment which is still above the industry average.

View our latest analysis for Fifth Third Bancorp

Fifth Third Bancorp's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. Based on the last payment, Fifth Third Bancorp was earning enough to cover the dividend, but free cash flows weren't positive. In general, we consider cash flow to be more important than earnings, so we would be cautious about relying on the sustainability of this dividend.

The next year is set to see EPS grow by 21.6%. If the dividend continues along recent trends, we estimate the payout ratio will be 37%, which is in the range that makes us comfortable with the sustainability of the dividend.

Fifth Third Bancorp Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2011, the first annual payment was US$0.04, compared to the most recent full-year payment of US$1.08. This means that it has been growing its distributions at 39% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

Fifth Third Bancorp Could Grow Its Dividend

The company's investors will be pleased to have been receiving dividend income for some time. It's encouraging to see Fifth Third Bancorp has been growing its earnings per share at 6.4% a year over the past five years. Growth in EPS bodes well for the dividend, as does the low payout ratio that the company is currently reporting.

In Summary

In summary, while it's good to see that the dividend hasn't been cut, we are a bit cautious about Fifth Third Bancorp's payments, as there could be some issues with sustaining them into the future. With cash flows lacking, it is difficult to see how the company can sustain a dividend payment. We would be a touch cautious of relying on this stock primarily for the dividend income.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. For example, we've identified 2 warning signs for Fifth Third Bancorp (1 is potentially serious!) that you should be aware of before investing. If you are a dividend investor, you might also want to look at our curated list of high performing dividend stock.

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